<PAGE>

                             AMERICAN INCOME FUND I

                            AMERICAN INCOME FUND I-A,

                       a Massachusetts Limited Partnership

                  Annual Report to the Partners, December 31, 1997


<PAGE>

                            AMERICAN INCOME FUND I-A,

                       a Massachusetts Limited Partnership

                     INDEX TO ANNUAL REPORT TO THE PARTNERS

<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
<S>                                                                      <C>
SELECTED FINANCIAL DATA                                                    2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS                                      3-6

FINANCIAL STATEMENTS:

Report of Independent Auditors                                             7

Statement of Financial Position
at December 31, 1997 and 1996                                              8

Statement of Operations
for the years ended December 31, 1997, 1996 and 1995                       9

Statement of Changes in Partners' Capital
for the years ended December 31, 1997, 1996 and 1995                       10

Statement of Cash Flows
for the years ended December 31, 1997, 1996 and 1995                      11

Notes to the Financial Statements                                      12-18

ADDITIONAL FINANCIAL INFORMATION:

Schedule of Excess (Deficiency) of Total Cash
Generated to Cost of Equipment Disposed                                   19

Statement of Cash and Distributable Cash
From Operations, Sales and Refinancings                                   20

Schedule of Costs Reimbursed to the General
Partner and its Affiliates as Required by
Section 9.4 of the Amended and Restated
Agreement and Certificate of Limited Partnership                          21

</TABLE>
                                      -1-
<PAGE>

                             SELECTED FINANCIAL DATA

     The following data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
financial statements.

     For each of the five years in the period ended December 31, 1997:
<TABLE>
<CAPTION>

    Summary of
    Operations              1997        1996         1995         1994        1993
------------------     -----------  -----------  -----------  -----------  -----------
<S>                    <C>          <C>          <C>          <C>          <C>
Lease revenue          $   515,362  $   585,768  $   813,318  $ 1,940,468  $ 2,515,703

Net income (loss)      $   136,727  $   197,908  $   385,102  $   405,161  $(1,021,539)

Per Unit:

   Net income (loss)   $      0.45  $      0.66  $      1.28  $      1.34  $     (3.39)

   Cash distributions  $      0.94  $      1.38  $      2.25  $      3.00  $      3.00


Financial Position
--------------------


Total assets           $ 2,144,122  $ 2,341,360  $ 2,583,424  $ 3,169,981  $ 4,675,380

Total long-term
   obligations         $        --  $        --  $     5,186  $   195,032  $ 1,185,453

Partners' capital      $ 2,059,985  $ 2,205,765  $ 2,422,201  $ 2,715,116  $ 3,213,978
</TABLE>


                                      -2-
<PAGE>



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                 Year ended December 31, 1997 compared to the year ended
            December 31, 1996 and the year ended December 31, 1996
                    compared to the year ended December 31, 1995

     Certain statements in this annual report of American Income Fund I-A
Limited Partnership (the "Partnership") that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to a variety of risks and
uncertainties. There are a number of important factors that could cause actual
results to differ materially from those expressed in any forward-looking
statements made herein. These factors include, but are not limited to, the
outcome of the Class Action Lawsuit described in Note 6 to the accompanying
financial statements and the ability of Equis Financial Group Limited
Partnership (formerly American Finance Group), a Massachusetts limited
partnership ("EFG"), to collect all rents due under the attendant lease
agreements and successfully remarket the Partnership's equipment upon the
expiration of such leases.

     The Year 2000 Issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. EFG's computer
programs were designed and written using four digits to define the applicable
year. As a result, EFG does not anticipate system failure or miscalculations
causing disruptions of operations. Based on recent assessments, EFG determined
that minimal modification of software is required so that its network operating
system will function properly with respect to dates in the year 2000 and
thereafter. EFG believes that with these modifications to the existing operating
system, the Year 2000 Issue will not pose significant operational problems for
its computer systems. EFG will utilize internal resources to upgrade software
for Year 2000 modifications and anticipates completing the Year 2000 project by
December 31, 1998, which is prior to any anticipated impact on its operating
system. The total cost of the Year 2000 project is expected to be insignificant
and have no effect on the results of operations of the Partnership.

Overview

     The Partnership was organized in 1990 as a direct-participation equipment
leasing program to acquire a diversified portfolio of capital equipment subject
to lease agreements with third parties. The value of the Partnership's equipment
portfolio decreases over time due to depreciation resulting from age and usage
of the equipment, as well as technological changes and other market factors. In
addition, the Partnership does not replace equipment as it is sold; therefore,
its aggregate investment value in equipment declines from asset disposals
occurring in the normal course. The Partnership's stated investment objectives
and policies contemplated that the Partnership would wind-up its operations
within approximately seven years of its inception. Presently, the Partnership is
a Nominal Defendant in a Class Action Lawsuit. The outcome of the Class Action
Lawsuit could alter the nature of the Partnership's organization and its future
business operations. See Note 6 to the accompanying financial statements.

Results of Operations

     For the year ended December 31, 1997, the Partnership recognized lease
revenue of $515,362 compared to $585,768 and $813,318 for the years ended
December 31, 1996 and 1995, respectively. Lease revenue in 1996 included the
receipt of $64,140 of lease termination rents received in connection with the
sale of the Partnership's interest in two Boeing 727-Advanced aircraft in July
1996 (see below). The decrease in lease revenue between 1995 and 1997 was
expected and resulted principally from primary lease term expirations and the
sale of equipment. The Partnership also earns interest income from temporary
investments of rental receipts and equipment sales proceeds in short-term
instruments.

     The Partnership's equipment portfolio includes certain assets in which the
Partnership holds a proportionate ownership interest. In such cases, the
remaining interests are owned by an affiliated equipment leasing program
sponsored by EFG. Proportionate equipment ownership enables the Partnership to
further diversify its equipment


                                      -3-
<PAGE>

portfolio by participating in the ownership of selected assets, thereby reducing
the general levels of risk which could result from a concentration in any single
equipment type, industry or lessee. The Partnership and each affiliate
individually report, in proportion to their respective ownership interests,
their respective shares of assets, liabilities, revenues, and expenses
associated with the equipment.

     In 1997, the Partnership sold equipment having a net book value of $14,538
to existing lessees and third parties. These sales resulted in a net gain, for
financial purposes, of $37,438 compared to a net gain in 1996 of $82,889 on
equipment having a net book value of $143,569, and a net gain in 1995 of
$144,671 on equipment having a net book value of $169,894. The equipment sales
in 1996 included the sale of the Partnership's interest in two Boeing
727-Advanced jet aircraft with an original cost and net book value of $557,072
and $106,544, respectively, which the Partnership sold to the existing lessee in
July 1996. In connection with these sales, the Partnership realized sale
proceeds of $148,460, which resulted in a net gain, for financial statement
purposes, of $41,916. In addition, the Partnership received lease termination
rents, discussed above, as this equipment was sold prior to the expiration of
the related lease term.

     It cannot be determined whether future sales of equipment will result in a
net gain or a net loss to the Partnership, as such transactions will be
dependent upon the condition and type of equipment being sold and its
marketability at the time of sale. In addition, the amount of gain or loss
reported for financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.

     The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time. EFG attempts to monitor these changes in order to identify
opportunities which may be advantageous to the Partnership and which will
maximize total cash returns for each asset.

     The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenue generated from that asset, together
with its residual value. The latter consists of cash proceeds realized upon the
asset's sale in addition to all other cash receipts obtained from renting the
asset on a re-lease, renewal or month-to-month basis. The Partnership classifies
such residual rental payments as lease revenue. Consequently, the amount of gain
or loss reported in the financial statements is not necessarily indicative of
the total residual value the Partnership achieved from leasing the equipment.

     Depreciation and amortization expense was $265,532, $329,827 and $520,164
for the years ended December 31, 1997, 1996 and 1995, respectively. For
financial reporting purposes, to the extent that an asset is held on primary
lease term, the Partnership depreciates the difference between (i) the cost of
the asset and (ii) the estimated residual value of the asset on a straight-line
basis over such term. For purposes of this policy, estimated residual values
represent estimates of equipment values at the date of primary lease expiration.
To the extent that an asset is held beyond its primary lease term, the
Partnership continues to depreciate the remaining net book value of the asset on
a straight-line basis over the asset's remaining economic life.

     Interest expense was $7,462 or less than 1% of lease revenue in 1995. No
interest expense was incurred in 1997 and 1996. Management fees were
approximately 4.9%, 5.2% and 4.2% of lease revenue during the years ended
December 31, 1997, 1996 and 1995, respectively. Management fees during the year
ended December 31, 1996 included $2,088 resulting from an underaccrual in 1995.
Management fees are based on 5% of gross lease revenue generated by operating
leases and 2% of gross lease revenue generated by full payout leases.

     Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as printing,
distribution and remarketing expenses. In certain cases, equipment storage or
repairs and maintenance costs may be incurred in connection with equipment being
remarketed. The overall increase in operating expenses from 1995 to 1997 is due
primarily to heavy maintenance and airframe overhaul costs incurred in
connection with the Partnership's interests in two Boeing 727 aircraft. In 1996,
the Partnership entered into a new 36-month lease agreement with Sunworld
International Airlines, Inc. to re-lease one of the aircraft at a base rent to
the Partnership of $7,540 per month. In April 1997, the Partnership entered into
a new 18-month lease agreement with Transmeridian Airlines to re-lease the
second aircraft at a base rent to the Partnership of $9,280 per month for 8
months and $8,120 per month for 10 months. The amount of future


                                      -4-
<PAGE>

operating expenses cannot be predicted with certainty; however, such expenses
are usually higher during the acquisition and liquidation phases of a
partnership. Other fluctuations typically occur in relation to the volume and
timing of remarketing activities.

Liquidity and Capital Resources and Discussion of Cash Flows

     The Partnership by its nature is a limited life entity which was
established for specific purposes described in the preceding "Overview". As an
equipment leasing program, the Partnership's principal operating activities
derive from asset rental transactions. Accordingly, the Partnership's principal
source of cash from operations is provided by the collection of periodic rents.
These cash inflows have been used to satisfy debt service obligations associated
with leveraged leases, and continue to be used to pay management fees and
operating costs. Operating activities generated net cash inflows of $320,582,
$484,140 and $802,351 in 1997, 1996 and 1995, respectively. Future renewal,
re-lease and equipment sale activities will continue to cause a decline in the
Partnership's lease revenue and corresponding sources of operating cash.
Overall, expenses associated with rental activities, such as management fees,
and net cash flow from operating activities will also continue to decline as the
Partnership experiences a higher frequency of remarketing events.

     Ultimately, the Partnership will dispose of all assets under lease. This
will occur principally through sale transactions whereby each asset will be sold
to the existing lessee or to a third party. Generally, this will occur upon
expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of an
asset. Such circumstances are infrequent and usually result in the collection of
stipulated cash settlements pursuant to terms and conditions contained in the
underlying lease agreements.

     Cash expended for equipment acquisitions and cash realized from asset
disposal transactions are reported under investing activities on the
accompanying Statement of Cash Flows. During the year ended December 31, 1997,
the Partnership realized $51,976 in equipment sale proceeds compared to $226,458
and $314,565 in 1996 and 1995, respectively. Future inflows of cash from asset
disposals will vary in timing and amount and will be influenced by many factors
including, but not limited to, the frequency and timing of lease expirations,
the type of equipment being sold, its condition and age, and future market
conditions. During the year ended December 31, 1996, the Partnership expended
$127,020 to replace certain aircraft engines to facilitate the re-lease of an
aircraft, in which it has an ownership interest, to Transmeridian Airlines.
There were no equipment acquisitions during the same periods in 1997 and 1995.

     The Partnership obtained long-term financing in connection with certain
equipment leases. The repayments of principal related to such indebtedness are
reported as a component of financing activities. The Partnership's notes payable
were fully amortized during the year ended December 31, 1996.

     Cash distributions to the General and Limited Partners are declared and
generally paid within fifteen days following the end of each calendar quarter.
The payment of such distributions is presented as a component of financing
activities. For the year ended December 31, 1997, the Partnership declared total
cash distributions of Distributable Cash from Operations and Distributable Cash
From Sales and Refinancings of $282,507. In accordance with the Amended and
Restated Agreement and Certificate of Limited Partnership, the Limited Partners
were allocated 95% of these distributions, or $268,382, and the General Partner
was allocated 5%, or $14,125. The fourth quarter 1997 cash distribution was paid
on January 13, 1998.

     Cash distributions paid to the Limited Partners consist of both a return of
and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, and the residual value realized for each asset at
its disposal date. Future market conditions, technological changes, the ability
of EFG to manage and remarket the assets, and many other events and
circumstances, could enhance or detract from individual asset yields and the
collective performance of the Partnership's equipment portfolio.

   The future liquidity of the Partnership will be influenced by the foregoing,
as well as the outcome of the Class Action Lawsuit described in Note 6 to the
accompanying financial statements. The General Partner anticipates


                                      -5-
<PAGE>

that cash proceeds resulting from the collection of contractual rents and the
outcome of residual activities will satisfy the Partnership's future expense
obligations. However, the amount of cash available for distribution in future
periods will fluctuate. Equipment lease expirations and asset disposals will
cause the Partnership's net cash from operating activities to diminish over
time; and equipment sale proceeds will vary in amount and period of realization.
In addition, the Partnership may be required to incur asset refurbishment or
upgrade costs in connection with future remarketing activities. Accordingly,
fluctuations in the level of future quarterly cash distributions are
anticipated.

                                      -6-
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Partners of American Income Fund I-A,
a Massachusetts Limited Partnership:

     We have audited the accompanying statements of financial position of
American Income Fund I-A, a Massachusetts Limited Partnership as of December 31,
1997 and 1996, and the related statements of operations, changes in partners'
capital, and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Income Fund I-A, a
Massachusetts Limited Partnership at December 31, 1997 and 1996, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.

     Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Additional Financial
Information identified in the Index to Annual Report to the Partners is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

                                                               ERNST & YOUNG LLP

Boston, Massachusetts
March 10, 1998


                                      -7-
<PAGE>

                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership

                         STATEMENT OF FINANCIAL POSITION
                           December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                 1997                1996
                                            -------------       -------------
<S>                                         <C>                 <C>
ASSETS

Cash and cash equivalents                   $   1,792,606       $   1,721,388

Rents receivable                                   32,780              27,902

Accounts receivable - affiliate                    67,880              61,144

Equipment at cost, net of accumulated
   depreciation of $3,720,329 and
   $3,836,846 at December 31, 1997                250,856             530,926
   and 1996, respectively                   -------------       -------------

     Total assets                           $   2,144,122       $   2,341,360
                                            =============       =============

LIABILITIES AND PARTNERS' CAPITAL

Accrued liabilities                         $       9,200       $      30,870
Accrued liabilities - affiliate                    12,923              22,945
Deferred rental income                              5,512               6,445
Cash distributions payable to partners             56,502              75,335
                                            -------------       -------------

     Total liabilities                             84,137             135,595
                                            -------------       -------------
Partners' capital (deficit):
   General Partner                               (213,886)           (206,597)
   Limited Partnership Interests
   (286,274 Units; initial purchase price       2,273,871           2,412,362
      of $25 each)                          -------------       -------------

     Total partners' capital                    2,059,985           2,205,765
                                            -------------       -------------

     Total liabilities and partners'        $   2,144,122       $   2,341,360
        capital                             =============       =============

</TABLE>
                   The accompanying notes are an integral part of these
                            financial statements.


                                      -8-
<PAGE>

                            AMERICAN INCOME FUND I-A,

                       a Massachusetts Limited Partnership

                             STATEMENT OF OPERATIONS
              for the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                      1997          1996        1995
                                   ----------  ----------  ----------
<S>                                <C>         <C>         <C>
Income:

   Lease revenue                   $  515,362  $  585,768  $  813,318

   Interest income                     82,978      80,345      83,850

   Gain on sale of equipment           37,438      82,889     144,671

                                   ----------  ----------  ----------
      Total income                    635,778     749,002   1,041,839
                                   ----------  ----------  ----------

Expenses:

   Depreciation and amortization      265,532     329,827     520,164

   Interest expense                        --          --       7,462

   Equipment management fees
      - affiliate                      25,477      30,670      33,736

   Operating expenses - affiliate     208,042     190,597      95,375
                                   ----------  ----------  ----------

      Total expenses                  499,051     551,094     656,737
                                   ----------  ----------  ----------

Net income                         $  136,727  $  197,908  $  385,102
                                   ==========  ==========  ==========

Net income
   per limited partnership unit    $     0.45  $     0.66  $     1.28
                                   ==========  ==========  ==========

Cash distributions declared
   per limited partnership unit    $     0.94  $     1.38  $     2.25
                                   ==========  ==========  ==========
</TABLE>

                   The accompanying notes are an integral part of these
                            financial statements.


                                      -9-
<PAGE>

                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership

                    STATEMENT OF CHANGES IN PARTNERS' CAPITAL
              for the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>

                                 General
                                 Partner        Limited Partners
                                 Amount        Units        Amount         Total
                              -----------   -----------  -----------   -----------
<S>                           <C>               <C>      <C>           <C>
Balance at December 31, 1994  $  (181,129)      286,274  $ 2,896,245   $ 2,715,116

Net income - 1995                  19,255            --      365,847       385,102

Cash distributions declared       (33,901)           --     (644,116)     (678,017)
                              -----------   -----------  -----------   -----------

Balance at December 31, 1995     (195,775)      286,274    2,617,976     2,422,201

Net income - 1996                   9,895            --      188,013       197,908

Cash distributions declared       (20,717)           --     (393,627)     (414,344)
                              -----------   -----------  -----------   -----------

Balance at December 31, 1996     (206,597)      286,274    2,412,362     2,205,765

Net income - 1997                   6,836            --      129,891       136,727

Cash distributions declared       (14,125)           --     (268,382)     (282,507)
                              -----------   -----------  -----------   -----------

Balance at December 31, 1997  $  (213,886)      286,274  $ 2,273,871   $ 2,059,985
                              ===========   ===========  ===========   ===========
</TABLE>

                   The accompanying notes are an integral part of these
                            financial statements.


                                      -10-
<PAGE>

                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership

                             STATEMENT OF CASH FLOWS
              for the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                           1997          1996          1995
                                       -----------   -----------   -----------
<S>                                    <C>           <C>           <C>
Cash flows from (used in)
   operating activities:

Net income                             $   136,727   $   197,908   $   385,102

Adjustments to reconcile net income
   to net cash from operating
      activities:
      Depreciation and amortization        265,532       329,827       520,164
      Gain on sale of equipment            (37,438)      (82,889)     (144,671)

Changes in assets and liabilities:
   Decrease (increase) in:
      Rents receivable                      (4,878)       47,250           332
      Accounts receivable - affiliate       (6,736)      (25,182)       32,217
   Increase (decrease) in:
      Accrued interest                          --          (135)       (1,796)
      Accrued liabilities                  (21,670)        5,040         5,560
      Accrued liabilities - affiliate      (10,022)       15,260         7,685
      Deferred rental income                  (933)       (2,939)       (2,242)
                                       -----------   -----------   -----------

        Net cash from operating
           activities                      320,582       484,140       802,351
                                       -----------   -----------   -----------
Cash flows from (used in) investing
   activities

   Purchase of equipment                        --      (127,020)           --
   Proceeds from equipment sales            51,976       226,458       314,565
                                       -----------   -----------   -----------

        Net cash from investing
           activities                       51,976        99,438       314,565
                                       -----------   -----------   -----------
Cash flows used in financing
   activities:

   Principal payments - notes
   payable                                      --        (5,186)     (189,846)
   Cash distributions paid                (301,340)     (452,012)     (791,020)
                                       -----------   -----------   -----------

        Net cash used in financing
           activities                     (301,340)     (457,198)     (980,866)
                                       -----------   -----------   -----------
Net increase in cash and cash
   equivalents                              71,218       126,380       136,050

Cash and cash equivalents at
   beginning of year                     1,721,388     1,595,008     1,458,958
                                       -----------   -----------   -----------
Cash and cash equivalents at
   end of year                         $ 1,792,606   $ 1,721,388   $ 1,595,008
                                       ===========   ===========   ===========
Supplemental disclosure of cash
   flow information:
   Cash paid during year for
      interest                         $        --   $       135   $     9,258
                                       ===========   ===========   ===========
</TABLE>

                   The accompanying notes are an integral part of these
                            financial statements.


                                      -11-
<PAGE>

                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                December 31, 1997

NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS

     American Income Fund I-A, a Massachusetts Limited Partnership (the
"Partnership") was organized as a limited partnership under the Massachusetts
Uniform Limited Partnership Act (the "Uniform Act") on March 6, 1990, for the
purpose of acquiring and leasing to third parties a diversified portfolio of
capital equipment. Partners' capital initially consisted of contributions of
$1,000 from the General Partner (AFG Leasing VI Incorporated) and $100 from the
Initial Limited Partner (AFG Assignor Corporation). On December 31, 1990, the
Partnership issued 286,274 units of limited partnership interest (the "Units")
to 359 investors. The Partnership's General Partner, AFG Leasing VI
Incorporated, is a Massachusetts corporation formed in 1990 and an affiliate of
Equis Financial Group Limited Partnership (formerly American Finance Group), a
Massachusetts limited partnership ("EFG"). The General Partner is not required
to make any other capital contributions except as may be required under the
Uniform Act and Section 6.1(b) of the Amended and Restated Agreement and
Certificate of Limited Partnership ("Restated Agreement, as amended").

     Significant operations commenced December 31, 1990 when the Partnership
made its initial equipment purchase. Pursuant to the Restated Agreement, as
amended, Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings will be allocated 95% to the Limited Partners and 5% to the General
Partner.

     Under the terms of a Management Agreement between the Partnership and EFG,
management services are provided by EFG to the Partnership at fees which the
General Partner believes to be competitive for similar services (see Note 4).

     EFG is a Massachusetts limited partnership formerly known as American
Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Manager or Advisor to the Partnership and several other
Direct-Participation equipment leasing programs sponsored or co-sponsored by EFG
(the "Other Investment Programs"). The Company arranges to broker or originate
equipment leases, acts as remarketing agent and asset manager, and provides
leasing support services, such as billing, collecting, and asset tracking.

     The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by Gary
D. Engle, its President and Chief Executive Officer. Equis Corporation also owns
a controlling 1% general partner interest in EFG's 99% limited partner, GDE
Acquisition Limited Partnership ("GDE LP"). Equis Corporation and GDE LP were
established in December 1994 by Mr. Engle for the sole purpose of acquiring the
business of AFG.

     In January 1996, the Company sold certain assets of AFG relating primarily
to the business of originating new leases, and the name "American Finance
Group," and its acronym, to a third party. AFG changed its name to Equis
Financial Group Limited Partnership after the sale was concluded. Pursuant to
terms of the sale agreements, EFG specifically reserved the rights to continue
using the name American Finance Group and its acronym in connection with the
Partnership and the Other Investment Programs and to continue managing all
assets owned by the Partnership and the Other Investment Programs.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Cash Flows

     The Partnership considers liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents. From time to time, the
Partnership invests excess cash with large institutional banks in reverse
repurchase agreements with overnight maturities. Under the terms of the
agreements, title to the underlying securities passes to the Partnership. The
securities underlying the agreements are book entry


                                      -12-
<PAGE>

                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

securities. At December 31, 1997, the Partnership had $1,689,667 invested in
federal agency discount notes and in reverse repurchase agreements secured by
U.S. Treasury Bills or interests in U.S. Government securities.

Revenue Recognition

     Rents are payable to the Partnership monthly or quarterly and no
significant amounts are calculated on factors other than the passage of time.
The leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. Future minimum rents of $245,145
are due as follows:

<TABLE>
<S>                                           <C>
     For the year ending December 31, 1998    $ 232,095
                                      1999       13,050
                                              ---------
                                     Total    $ 245,145
                                              =========
</TABLE>

     Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1997, 1996 and 1995 is as
follows:

<TABLE>
<CAPTION>
                                     1997          1996           1995
                                   ---------    ---------      ---------
<S>                                <C>          <C>            <C>
American National Can Company      $143,116      $134,169      $ 172,558
Sunworld International Airlines,
   Inc.                            $ 90,480      $ 85,805      $      --
Transmeridian Airlines             $ 74,511      $     --      $      --
Ford Motor Company                 $ 64,515      $     --      $  93,458
Bergen Brunswig Medical Inc.
  (formerly Durr Medical)          $ 59,511      $ 75,742      $      --
Northwest Airlines, Inc.           $     --      $116,306      $ 248,359
</TABLE>


Use of Estimates

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes.

Actual results could differ from those estimates.

Equipment on Lease

     All equipment was acquired from EFG, one of its Affiliates or from
third-party sellers. Equipment cost represents asset base price plus acquisition
fees and was determined in accordance with the Restated Agreement, as amended,
and certain regulatory guidelines. Asset base price is affected by the
relationship of the seller to the Partnership as summarized herein. Where the
seller of the equipment was EFG or an Affiliate, asset base price was the lower
of (i) the actual price paid for the equipment by EFG or the Affiliate plus all
actual costs accrued by EFG or the Affiliate while carrying the equipment less
the amount of all rents earned by EFG or the Affiliate prior to selling the
equipment or (ii) fair market value as determined by the General Partner in its
best judgment, including all liens and encumbrances on the equipment and other
actual expenses. Where the seller of the equipment was a third party who did not
manufacture the equipment, asset base price was the lower of (i) the price
invoiced by the third party or (ii) fair market value as determined by the
General Partner. Where the seller of the equipment was a third party who also
manufactured the equipment, asset base price was the manufacturer's invoice
price, which price was considered to be representative of fair market value.

Depreciation and Amortization


                                      -13-
<PAGE>

                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

     The Partnership's depreciation policy is intended to allocate the cost of
equipment over the period during which it produces economic benefit. The
principal period of economic benefit is considered to correspond to each asset's
primary lease term, which term generally represents the period of greatest
revenue potential for each asset. Accordingly, to the extent that an asset is
held on primary lease term, the Partnership depreciates the difference between
(i) the cost of the asset and (ii) the estimated residual value of the asset on
a straight-line basis over such term. For purposes of this policy, estimated
residual values represent estimates of equipment values at the date of primary
lease expiration. To the extent that an asset is held beyond its primary lease
term, the Partnership continues to depreciate the remaining net book value of
the asset on a straight-line basis over the asset's remaining economic life.
Periodically, the General Partner evaluates the net carrying value of equipment
to determine whether it exceeds estimated net realizable value. Adjustments to
reduce the net carrying value of equipment are recorded in those instances where
estimated net realizable value is considered to be less than net carrying value.

     The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time.

     Organization costs were amortized using the straight-line method over a
period of five years.

Accrued Liabilities - Affiliate

     Unpaid operating expenses paid by EFG on behalf of the Partnership and
accrued but unpaid administrative charges and management fees are reported as
Accrued Liabilities - Affiliate (see Note 4).

Allocation of Profits and Losses

     For financial statement purposes, net income or loss is allocated to each
Partner according to their respective ownership percentages (95% to the Limited
Partners and 5% to the General Partner). See Note 5 for allocation of income or
loss for income tax purposes.

Net Income and Cash Distributions Per Unit

     Net income and cash distributions per Unit are based on 286,274 Units
outstanding during each of the three years in the period ended December 31, 1997
and computed after allocation of the General Partner's 5% share of net income
and cash distributions.

Provision for Income Taxes

     No provision or benefit from income taxes is included in the accompanying
financial statements. The Partners are responsible for reporting their
proportionate shares of the Partnership's taxable income or loss and other tax
attributes on their tax returns.

NOTE 3 - EQUIPMENT

     The following is a summary of equipment owned by the Partnership at
December 31, 1997. Remaining Lease Term (Months), as used below, represents the
number of months remaining from December 31, 1997 under contracted lease terms
and is presented as a range when more than one lease agreement is contained in
the stated equipment category. A Remaining Lease Term equal to zero reflects
equipment either held for sale


                                      -14-
<PAGE>

                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

or re-lease or being leased on a month-to-month basis. In the opinion of EFG,
the acquisition cost of the equipment did not exceed its fair market value.

<TABLE>
<CAPTION>
                            Remaining
                            Lease Term      Equipment
        Equipment Type       (Months)       at Cost           Location
--------------------------  ----------  ------------- --------------------------
<S>                         <C>         <C>           <C>
Aircraft                        10-13   $  2,288,254  KY/TX
Materials handling               0-21      1,100,792  CA/DE/IL/KY/MI/NC/NJ/NV
                                                      OH/WI/Foreign
Communications                      0        383,676  AL
Computers and peripherals        0-12        137,427  AL/GA/KY/MS/NC/SC/TN/TX/VA
Tractors/heavy duty trucks          0         61,036  CA
                                          -----------
                   Total equipment cost     3,971,185

               Accumulated depreciation    (3,720,329)
                                          -----------
          Equipment, net of accumulated
                           depreciation   $   250,856
                                          ===========
</TABLE>

     In certain cases, the cost of the Partnership's equipment represents a
proportionate ownership interest. The remaining interests are owned by EFG or an
affiliated equipment leasing program sponsored by EFG. The Partnership and each
affiliate individually report, in proportion to their respective ownership
interests, their respective shares of assets, liabilities, revenues, and
expenses associated with the equipment. Proportionate equipment ownership
enables the Partnership to further diversify its equipment portfolio by
participating in the ownership of selected assets, thereby reducing the general
levels of risk which could result from a concentration in any single equipment
type, industry or lessee. At December 31, 1997, the Partnership's equipment
portfolio included equipment having a proportionate original cost of $2,415,273,
representing approximately 61% of total equipment cost.

     Generally, the costs associated with maintaining, insuring and operating
the Partnership's equipment are incurred by the respective lessees pursuant to
terms specified in their individual lease agreements with the Partnership.

   As equipment is sold to third parties, or otherwise disposed of, the
Partnership recognizes a gain or loss equal to the difference between the net
book value of the equipment at the time of sale or disposition and the proceeds
realized upon sale or disposition. The ultimate realization of estimated
residual value in the equipment is dependent upon, among other things, EFG's
ability to maximize proceeds from selling or re-leasing the equipment upon the
expiration of the primary lease terms. The summary above includes equipment held
for sale or re-lease which had been fully depreciated with a cost of
approximately $10,500 at December 31, 1997. The General Partner is actively
seeking the sale or re-lease of all equipment not on lease. In addition, the
summary above also includes equipment being leased on a month-to-month basis.

NOTE 4 - RELATED PARTY TRANSACTIONS

     All operating expenses incurred by the Partnership are paid by EFG on
behalf of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during the years ended December 31,
1997, 1996 and 1995, which were paid or accrued by the Partnership to EFG or its
Affiliates, are as follows:

<TABLE>
<CAPTION>
                                      1997            1996            1995
                                  ------------    ------------    ------------
<S>                               <C>             <C>             <C>
</TABLE>

                                      -15-
<PAGE>


                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)
<TABLE>
<S>                               <C>             <C>             <C>
Equipment management fees         $     25,477    $     30,670    $     33,736
Administrative charges                  54,006          32,428          12,552
Reimbursable operating
   expenses due to third parties       154,036         158,169          82,823
                                  ------------    ------------    ------------

                   Total          $    233,519    $    221,267    $    129,111
                                  ============    ============    ============
</TABLE>

     As provided under the terms of the Management Agreement, EFG is compensated
for its services to the Partnership. Such services include all aspects of
acquisition, management and sale of equipment. For acquisition services, EFG is
compensated by an amount equal to 2.23% of Equipment Base Price paid by the
Partnership. For management services, EFG is compensated by an amount equal to
the lesser of (i) 5% of gross operating lease rental revenue and 2% of gross
full payout lease rental revenue received by the Partnership or (ii) fees which
the General Partner reasonably believes to be competitive for similar services
for similar equipment. Both of these fees are subject to certain limitations
defined in the Management Agreement. Compensation to EFG for services connected
to the sale of equipment is calculated as the lesser of (i) 3% of gross sale
proceeds or (ii) one-half of reasonable brokerage fees otherwise payable under
arm's length circumstances. Payment of the remarketing fee is subordinated to
Payout and is subject to certain limitations defined in the Management
Agreement.

     Administrative charges represent amounts owed to EFG, pursuant to Section
9.4(c) of the Restated Agreement, as amended, for persons employed by EFG who
are engaged in providing administrative services to the Partnership.
Reimbursable operating expenses due to third parties represent costs paid by EFG
on behalf of the Partnership which are reimbursed to EFG.

     All equipment was acquired from EFG, one of its Affiliates or from
third-party sellers. The Partnership's Purchase Price was determined by the
method described in Note 2.

     All rents and proceeds from the sale of equipment are paid directly to
either EFG or to a lender. EFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the Partnership.
At December 31, 1997, the Partnership was owed $67,880 by EFG for such funds and
the interest thereon. These funds were paid to the Partnership in January 1998.

NOTE 5 - INCOME TAXES

     The Partnership is not a taxable entity for federal income tax purposes.
Accordingly, no provision for income taxes has been recorded in the accounts of
the Partnership.

     For financial statement purposes, the Partnership allocates net income or
loss to each class of partner according to their respective ownership
percentages (95% to the Limited Partners and 5% to the General Partner). This
convention differs from the income or loss allocation requirements for income
tax and Dissolution Event purposes as delineated in the Restated Agreement, as
amended. For income tax purposes, the Partnership allocates net income or net
loss in accordance with the provisions of such agreement. The Restated
Agreement, as amended, requires that upon dissolution of the Partnership, the
General Partner will be required to contribute to the Partnership an amount
equal to any negative balance which may exist in the General Partner's tax
capital account. At December 31, 1997, the General Partner had a positive tax
capital account balance.

     The following is a reconciliation between net income reported for financial
statement and federal income tax reporting purposes for the years ended December
31, 1997, 1996 and 1995:

<TABLE>
<CAPTION>
                                         1997          1996           1995
                                     ------------  ------------   ------------
<S>                                  <C>           <C>            <C>
Net income                           $    136,727  $    197,908   $    385,102

</TABLE>
                                      -16-
<PAGE>


<TABLE>
<S>                                  <C>           <C>            <C>
   Financial statement depreciation in
      excess of (less than) tax
      depreciation                         51,394        85,805        (29,715)
   Deferred rental income                    (933)       (2,939)        (2,242)
   Other                                  (13,458)      (38,306)       117,824
                                     ------------   ------------   ------------
Net income for federal income tax
   reporting purposes                $    173,730  $    242,468   $    470,969
                                     ============  ============   ============
</TABLE>

     The principal component of "Other" consists of the difference between the
tax gain on equipment disposals and the financial statement gain (loss) on
disposals.

     The following is a reconciliation between partners' capital reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                                     1997              1996
                                                 ------------     ------------
<S>                                              <C>              <C>
Partners' capital                                $  2,059,985     $  2,205,765

   Add back selling commissions and organization
   and offering costs                                 800,146          800,146

   Financial statement distributions in excess
   of tax distributions                                 2,825            3,767

   Cumulative difference between federal income
   tax and financial statement income (loss)          374,688          337,685
                                                 ------------     ------------
Partners' capital for federal income tax
reporting purposes                               $  3,237,644     $  3,347,363
                                                 ============     ============
</TABLE>


NOTE 6 - LEGAL PROCEEDINGS

        On or about January 15, 1998, certain plaintiffs (the
"Plaintiffs") filed a class and derivative action, captioned
Leonard Rosenblum, et al. v. Equis Financial Group Limited
Partnership, et al., in the United States District Court for the
Southern District of Florida (the "Court") on behalf of a
proposed class of investors in 28 equipment leasing programs
sponsored by EFG, including the Partnership (collectively, the
"Nominal Defendants"), against EFG and a number of its
affiliates, including the General Partner, as defendants
(collectively, the "Defendants").  Certain of the Plaintiffs, on
or about June 24, 1997, had filed an earlier derivative action,
captioned Leonard Rosenblum, et al. v. Equis Financial Group
Limited Partnership, et al., in the Superior Court of the
Commonwealth of Massachusetts on behalf of the Nominal
Defendants against the Defendants.  Both actions are referred to
herein collectively as the "Class Action Lawsuit."

        The Plaintiffs have asserted, among other things, claims
against the Defendants on behalf of the Nominal Defendants for
violations of the Securities Exchange Act of 1934, common law
fraud, breach of contract, breach of fiduciary duty, and
violations of the partnership or trust agreements that govern
each of the Nominal Defendants.  The Defendants have denied, and
continue to deny, that any of them have committed or threatened
to commit any violations of law or breached any fiduciary duties
to the Plaintiffs or the Nominal Defendants.

        On March 9, 1998, counsel for the Defendants and the
Plaintiffs entered into a Memorandum of Understanding setting
forth the terms pursuant to which a settlement of the Class
Action Lawsuit is intended to be achieved and which, among other
things, is expected to reduce the burdens and expenses attendant
to continuing litigation.  The Memorandum of Understanding
represents a preliminary step towards a comprehensive
Stipulation of Settlement between the parties that must be
presented to and approved by the Court as a condition precedent
to effecting a settlement.  The Memorandum of Understanding (i)
prescribes a number of conditions necessary to achieving a

                                      -17-
<PAGE>

                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership
                        Notes to the Financial Statements

                                   (Continued)

settlement, including providing the partners (or beneficiaries,
as applicable) of the Nominal Defendants with the opportunity to
vote on any settlement and (ii) contemplates various changes
that, if effected, would alter the future operations of the
Nominal Defendants.  With respect to the Partnership and 10
affiliated partnerships (hereafter referred to as the "Exchange
Partnerships"), the Memorandum of Understanding provides for the
restructuring of their respective business operations into a
single successor company whose securities would be listed and
traded on a national stock exchange.  The partners of the
Exchange Partnerships would receive both common stock in the new
company and a cash distribution in exchange for their existing
partnership interests.  Such a transaction would, among other
things, allow for the consolidation of the Partnership's
operating expenses with other similarly-organized equipment
leasing programs.  To the extent that the parties agree upon a
Stipulation of Settlement that is approved by the Court, the
complete terms thereof will be communicated to all of the
partners (or beneficiaries) of the Nominal Defendants to enable
them to vote thereon.

        There can be no assurance that the parties will agree
upon a Stipulation of Settlement,  or that it will be approved
by the Court, or that the outcome of the voting by the partners
(or beneficiaries) of the Nominal Defendants, including the
Partnership, will result in a settlement finally being effected
or in the Partnership being included in any such settlement.
The General Partner and its affiliates, in consultation with
counsel, concur that there is a reasonable basis to believe that
a Stipulation of Settlement will be agreed upon by the parties
and approved by the Court.  In the absence of a Stipulation of
Settlement approved by the Court, the Defendants intend to
defend vigorously against the claims asserted in the Class
Action Lawsuit.  The General Partner and its affiliates cannot
predict with any degree of certainty the ultimate outcome of
such litigation.

     On September 22, 1995, Investors Asset Holding Corp. and First Security
Bank, N.A., trustees of the Partnership and various other affiliated investment
programs, filed an action in the United States District Court for the District
of Massachusetts against Northwest Airlines, Inc. ("Northwest"), a lessee of the
Partnership. The trustees are seeking damages from Northwest and a declaratory
judgment concerning Northwest's maintenance and return obligations for certain
aircraft interests owned by the Partnership. In addition to filing its Answer to
the Plaintiffs' Complaint, Northwest also filed a motion to transfer venue of
this proceeding to Minnesota. The Court denied such motion. The parties have
completed the initial phase of discovery, and motions for partial summary
judgment are pending. At present, it is not possible to determine the ultimate
outcome of this matter.


                                      -18-
<PAGE>

                        ADDITIONAL FINANCIAL INFORMATION


<PAGE>

                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership

         SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH GENERATED TO COST
                              OF EQUIPMENT DISPOSED

              for the years ended December 31, 1997, 1996 and 1995

     The Partnership classifies all rents from leasing equipment as lease
revenue. Upon expiration of the primary lease terms, equipment may be sold,
rented on a month-to-month basis or re-leased for a defined period under a new
or extended lease agreement. The proceeds generated from selling or re-leasing
the equipment, in addition to any month-to-month revenue, represent the total
residual value realized for each item of equipment. Therefore, the financial
statement gain or loss, which reflects the difference between the net book value
of the equipment at the time of sale or disposition and the proceeds realized
upon sale or disposition may not reflect the aggregate residual proceeds
realized by the Partnership for such equipment.

     The following is a summary of cash excess associated with equipment
dispositions occurring in the years ended December 31, 1997, 1996 and 1995.

<TABLE>
<CAPTION>
                                      1997             1996             1995
                                  ------------     ------------     ------------
<S>                               <C>              <C>              <C>
Rents earned prior to disposal
   of equipment, net of interest
   charges                        $    506,246     $    836,280     $    819,974

Sale proceeds realized upon
   disposition of equipment             51,976          226,458          314,565
                                  ------------     ------------     ------------
Total cash generated from rents
   and equipment sale proceeds         558,222        1,062,738        1,134,539

Original acquisition cost of
   equipment disposed                  396,587          882,437          896,799
                                  ------------     ------------     ------------
Excess of total cash generated
   to cost of equipment disposed  $    161,635     $    180,301     $    237,740
                                  ============     ============     ============
</TABLE>

                                      -19-
<PAGE>

                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership

            STATEMENT OF CASH AND DISTRIBUTABLE CASH FROM OPERATIONS,
                             SALES AND REFINANCINGS

                      for the year ended December 31, 1997

<TABLE>
<CAPTION>
                                                    Sales and
                                   Operations      Refinancings         Total
                                  ------------     ------------     -----------
<S>                               <C>              <C>             <C>
Net income                        $     99,289     $     37,438    $    136,727

Add:
   Depreciation                        265,532               --         265,532
   Management fees                      25,477               --          25,477
   Book value of disposed
   equipment                                --           14,538          14,538
                                  ------------     ------------    ------------
   Cash from operations, sales
   and refinancings                    390,298           51,976         442,274

Less:
   Management fees                     (25,477)              --         (25,477)
                                  ------------     ------------    ------------
   Distributable cash from
   operations, sales and
   refinancings                        364,821           51,976         416,797

Other sources and uses of cash:
   Cash at beginning of year         1,721,388               --       1,721,388
   Net change in receivables and
      accruals                         (44,239)              --         (44,239)

Less:
   Cash distributions paid            (249,364)         (51,976)       (301,340)
                                  ------------     ------------    ------------
Cash at end of year               $  1,792,606               --    $  1,792,606
                                  ============     ============    ============
</TABLE>

                                      -20-
<PAGE>



                            AMERICAN INCOME FUND I-A,
                       a Massachusetts Limited Partnership

                       SCHEDULE OF COSTS REIMBURSED TO THE
                 GENERAL PARTNER AND ITS AFFILIATES AS REQUIRED

                   BY SECTION 9.4 OF THE AMENDED AND RESTATED
                AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP

                                December 31, 1997

     For the year ended December 31, 1997, the Partnership reimbursed the
General Partner and its Affiliates for the following costs:

<TABLE>
<S>                                          <C>
      Operating expenses                     $ 220,331

</TABLE>


                                      -21-